As the housing sector continues to improve and median home prices rise, inventory and credit conditions remain tight and are a substantial challenge to the industry.
Home prices see best gains in seven years
According to the National Association of Realtors’ (NAR’s) first quarter report, median home prices saw the best year-over-year gains in over seven years, rising to $176,000, with median single-family home prices rising in 87 percent of the 150 largest metropolitan statistical areas (MSAs) during the same period.
Dr. Lawrence Yun, NAR chief economist, said many areas are experiencing a seller’s market and real estate professionals tell us that they are resorting to extensive marketing campaigns nearly begging homeowners to list their homes, as inventory remains extremely tight in many areas.
Dr. Yun said, “The supply/demand balance is clearly tilted toward sellers in a good portion of the country. Inventory conditions are expected to remain fairly constrained this year, so overall price increases should be well above the historic gain of one-to-two percentage points above the rate of inflation. If home builders can continue to ramp up production, then home price growth is expected to moderate in 2014.”
16.8 percent drop in inventory
At the end of the first quarter there were 1.93 million existing homes available for sale, which is 16.8 percent below the close of the first quarter of 2012, when 2.32 million homes were on the market.
Total existing home sales rose 0.8 percent in the quarter, representing a 9.8 percent improvement compared to the first quarter of 2012. NAR reports that sales were at the highest level since the fourth quarter of 2009, when they reached 4.95 million as buyers responded to tax incentives.
Distressed homes generally sold at discounts of up to 20 percent and accounted for 23 percent of first quarter sales, down from 32 percent a year ago.
Regional performance varied
“Some of the previously hard-hit markets like Phoenix, Sacramento and Miami continue to experience a dramatic turnaround, while a new set of areas like Atlanta, Minneapolis and Seattle have begun to show strong signs of upward momentum,” Dr. Yun said.
According to NAR:
- Existing-home sales in the Northeast rose 4.4 percent in the first quarter and are 9.1 percent above the first quarter of 2012. The median existing single-family home price in the Northeast rose 2.9 percent to $234,000 in the first quarter from a year ago.
- In the Midwest, existing-home sales increased 1.2 percent in the first quarter and are 15.0 percent higher than a year ago. The median existing single-family home price in the Midwest increased 8.2 percent to $135,100 in the first quarter from the same quarter last year.
- Existing-home sales in the South edged up 0.7 percent in the first quarter and are 13.3 percent above the first quarter of 2012. The regional median existing single-family home price was $156,800 in the first quarter, up 9.3 percent from a year earlier.
- In the West, which is the region most impacted by limited housing supplies, existing-home sales slipped 1.1 percent in the first quarter but are 0.6 percent above a year ago. The median existing single-family home price in the West jumped 24.4 percent to $247,800 in the first quarter from the first quarter of 2012.